Cryptocurrency is not exempt from taxation, Canadian government argues

For miners or traders who ride thevolatile market for the cryptocurrency Bitcoins, the digital money can be a lucrative source of real-world income. Bitcoins in theory are unregulated by any government entity and difficult to trace. But the Canadian government is looking to change that.

With Bitcoin cash value increasing five-fold to around $250 USD/Bitcoin in April, the Canada Revenue Agency is salivating at the prospect of extra taxes from its domestic miners/traders. The CRA says that when using Bitcoins for transactions Barter Transaction rules -- long an offline-focused rulebook -- are in effect. These rules mandate taxes on bartered goods, and Bitcoins are no exception. The government's rules state that the value of what is received is used to determine the value of what's given up.

The CRA will be hunting for Bitcoin tax dodgers for the first time.
[Sources: Bitcoin Forum (left); Nerd Merit Badges (right)]

Some Canadians are already claiming Bitcoin income on their taxes. Comments Regina currency trader Jeff Cliff in a CBC interview, "It's fairly anonymous system. I'm not so much into the privacy side of it, so that's why I claim it."

Others feel the government should keep their hands off Bitcoins. But Canadians who think the CRA is treating Bitcoin earnings or barter as an "honor system" may be in for a rude surprise. The CRA told the CBC that it will be watching for unreported Bitcoin revenue this year.

The CRA will reportedly crack down on unreported Bitcoin revenue. [Image Source: The CP]

Saskatoon realtor Paul Chavady who has taken the unusual step of allowing buyers to use Bitcoins, explains how this could work, commenting, "When you sell [the BitCoins], they will deposit that in your account. As soon as it turns into Canadian dollars, it's back in the eyes of the CRA and everybody else. If you get a big deposit of $10,000, or $100,000, [CRA is] going to say, 'Hey, where did that come from?'"

In other words don't count on cryptography to protect you if you cash out your Bitcoin wealth for real world purchases; the (Canadian) tax man knows better.

Yeah, liberals are totally about consistently applying laws. Tim Geithner cheated on his taxes and was made the treasury secretary, Timmy Public cheats on his taxes and gets hounded by the IRS using tactics that would the the Gestapo pause.

Or how about how everyone (except those who donated to the DNC) has to comply with Obamacare...